Pefindo assigns 'A' rating to PLN

Pefindo assigns 'A' rating to PLN

JAKARTA (JP): Indonesia's Pefindo credit-rating agency has
reaffirmed its "A" long-term rating for both Bond IV, and Bond V,
amounting to Rp 680 billion (US$290.6 million), and Rp 1
trillion, respectively.

The bonds are issued by the State Electricity Company (PLN).

The "A" rating means PLN debt security has a low investment
risk, supported by good capacity to pay all interest and
principal on time, with low susceptibility to adverse changes.

Pefindo announced the reaffirmation of the rating reflected
PLN's favorable standing, provided by the regulatory frameworks
and the company's monopolistic position in the market.

The rating agency based its assessment on the healthy growth
of demand for electricity in Indonesia, and the PLN's strong
financial flexibility.

"We've also accounted for the company's lessening
profitability, stable leverage and deteriorating liquidity,"
Pefindo said.

PLN is currently facing pressure over its financial
performance, which falls short of projected targets, accompanied
by apparent deteriorating liquidity.

Pefindo noted PLN's crash programs in power generation in 1994
had resulted in the deterioration.

The rating agency foresees additional complexity to PLN
financial management, as a result of the privatization drive
initiated by the government in the power generation sector.

The privatization, and PLN's large investment programs for the
1996-2000 period, have combined to place PLN in a delicate
position, since they must respond to various government agencies
and multi-lateral financial institutions, Pefindo noted.

PLN's leverage is favorable, with the company's debt-to-equity
ratio of 71 percent.

However, the rating agency contends the ever-increasing
investment needs of the transmission and distribution sectors may
impose a slight shift in PLN's current leverage position, as the
company is constantly pressured to increase self-financing.

But Pefindo also sees positive development in cost management,
as reflected in the disciplinary programs initiated in inventory
management. (vin)